Application of the ARDL model for examining the relationship between foreign loans and economic growth in Vietnam
Main Article Content
Abstract
The objective of the study is to analyze the relationship between foreign loans and economic growth in Vietnam in the period 1986 – 2021. The Autoregressive Distributed Lag (ARDL) model is applied, by applying the bound test to analyze long-term effects, then using the error correction model (ECM) to analyze short-term impact. The findings show that there is a cointegrated relationship exist between foreign loans and economic growth in Vietnam. Foreign loans have a positive impact on economic growth in the long and short term. It shows that foreign loans also contribute to Vietnam's economic development in the period 1986 – 2021. In the coming period, therefore, Vietnam needs to make better use of foreign aid as well as foreign loans and credits to promote economic growth and contribute to the country's development in the future.
Article Details
Keywords
Economic growth, The relationship, Foreign loans
References
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Afolabi, B., Awoniyi, L., & Ayeni, R. (2017). The nexus between external debt and economic growth in Nigeria: Lap Lambert Academic Publishing.
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Ali, M. A., & Fei, Y. S. (2016). Impact of Malaysia's capital market and determinants on economic growth. The Journal of Asian Finance, Economics and Business, 3(2), 5-11. https://doi.org/10.13106-/jafeb.2016.vol3.no2.5
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Ehigiamusoe, K. U., & Lean, H. H. (2019). Foreign capital inflows and economic growth in Nigeria: any nexus? Journal of African Business, 20(4), 455-471. https://doi.org/10.1080/15228916.2019.1581010
Engle, R. F., & Granger, C. W. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica, 55(2), 251–276. https://doi.org/10.2307/1913236.
Golder, U., Sheikh, M., & Sultana, F. (2021). The relationship between foreign aid and economic growth: Empirical evidence from Bangladesh. The Journal of Asian Finance, Economics and Business, 8(4), 625-633. https://ssrn.com/abstract=3826083
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Jhingan, M. (2007). The Economics of Development and Planning, translated into Indonesian by D: Guritno. Jakarta: Rajawali Press.
Johansen, S. (1991). Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica: journal of the Econometric Society, 59(6), 1551-1580. https://doi.org/-10.2307/2938278
Kasidi, F., & Said, A. M. (2013). Impact of External Debt on Economic Growth: A Case Study of Tanzania. Advances in Management and Applied Economics, 3(4), 59-82. https://www.scienpress.com-/Upload/AMAE/Vol%203_4_6.pdf
Le, B., Ngo, T. T. T., Nguyen, N. T., & Nguyen, D. T. (2021). The relationship between foreign direct investment and local economic growth: A case study of Binh Dinh Province, Vietnam. The Journal of Asian Finance, Economics and Business, 8(4), 33-42. https://doi.org/10.13106/jafeb.2021.vol8.no4.0033
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Asafo, S. S., & Matuka, A. (2019). External debt and economic growth in Ghana: a co-integration and vector error correction analysis. Theoretical and Practical Research in the Economic Fields, 10(1), 45-53. https://doi.org/10.14505/tpref.v10.1(19).05
Moh’d AL-Tamimi, K. A., & Mohammad, S. J. (2019). Impact of external debt on economic growth in Jordan for the period (2010–2017). International Journal of Economics and Finance, 11(4), 114-118. DOI:10.5539/ijef.v11n4p114
Nguyen, C. H. (2020). The impact of foreign direct investment, aid and exports on economic growth in Vietnam. The Journal of Asian Finance, Economics and Business, 7(10), 581-589. https://doi.org/10.13106/jafeb.2020.vol7.no10.581
Nguyen, C. H., Pham, T. T. Q., Tran, T. H., & Nguyen, T. H. (2021). The relationship between foreign capital inflows and economic growth: Empirical evidence from Vietnam. The Journal of Asian Finance, Economics and Business, 8(11), 325-332. https://doi.org/10.13106/jafeb.2021.vol8.no11.0325
Omodero, C. O., & Alpheaus, O. E. (2019). The effect of foreign debt on the economic growth of Nigeria. Management Dynamics in the Knowledge Economy, 7(3), 291-306. DOI 10.25019/MDKE/7.3.01.
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. doi: https://doi.org/10.1002/jae.616
Quoc, C. H., & Thi, C. D. (2018). Analysis of foreign direct investment and economic growth in Vietnam. International Journal of Business, Economics and Law, 15(5), 19-27. https://ijbel.com/wp-content/uploads/2018/04/IJBEL15_208.pdf
Rehman, S. U., & Ahmad, H. K. (2016). The impact of foreign capital inflows on economic growth: pooled mean group analysis for developing countries. Pakistan Economic and Social Review, 54(2), 191-203. https://www.econpu.edu.pk/wp-content/uploads/2017/04/2-v54_2_16.pdf
Samuelson, P. A., & Nordhaus, W. D. (2010). Economics (19. Aufl.). Boston: McGraw-Hill Irwin.
Saxena, S. P., & Shanker, I. (2018). External debt and economic growth in India. Social Science Asia, 4(1), 15-25. http://164.115.28.46/nrctejournal/file_upload/digital_file/161_f1503.pdf
Singh, G. (2015). Causality Between Export and Economic Growth: A Cause Study of India. Indian Journal of Accounting, 16(1), 109-120. https://ssrn.com/abstract=2714774
Sulaiman, L., & Azeez, B. (2012). Effect of external debt on economic growth of Nigeria. Journal of Economics and sustainable Development, 3(8), 71-79. https://core.ac.uk/download/pdf/234645667.pdf
Shin, Y., & Pesaran, M. H. (1999). An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis. In Econometrics and Economic Theory in the 20th century: The Ragnar Frish Centennial Symposium (pp. 371-413). Cambridge University Press.
Sijabat, R. (2022). The Association of Economic Growth, Foreign Aid, Foreign Direct Investment and Gross Capital Formation in Indonesia: Evidence from the Toda–Yamamoto Approach. Economies, 10(4), 93. https://doi.org/10.3390/economies10040093
Todaro, M., & Smith, S. (2006). Economic Development (nineth edition). England: Pearson Educational Limited.
World Bank (2022). World Development Indicators. http://databank.worldbank.org/ data/reports.aspx?source=World-Development-Indicators
Zouhaier, H., & Fatma, M. (2014). Debt and economic growth. International Journal of Economics and Financial Issues, 4(2), 440-448. https://dergipark.org.tr/en/pub/ijefi/issue/31962/352013
Ada, M. S., Agu, O., & Umunna, G. (2016). Impact of external debt on economic growth in Nigeria: An ARDL bound testing approach. Journal of Economics and Sustainable Development, 7(10), 16-26. https://core.ac.uk/reader/234647500
Adebayo, T. S., & Beton Kalmaz, D. (2020). Ongoing debate between foreign aid and economic growth in Nigeria: a wavelet analysis. Social Science Quarterly, 101(5), 2032-2051. doi: https://doi.org/10.1111/ssqu.12841
Afolabi, B., Awoniyi, L., & Ayeni, R. (2017). The nexus between external debt and economic growth in Nigeria: Lap Lambert Academic Publishing.
Akram, N. (2016). Public debt and pro-poor economic growth evidence from South Asian countries. Economic Research-Ekonomska Istraživanja, 29(1), 746-757. https://doi.org/10.1080/1331677X.2016.1197550
Ali, M. A., & Fei, Y. S. (2016). Impact of Malaysia's capital market and determinants on economic growth. The Journal of Asian Finance, Economics and Business, 3(2), 5-11. https://doi.org/10.13106-/jafeb.2016.vol3.no2.5
Ali, R., & Mustafa, U. (2012). External Debt Accumulation and Its Impact on Economic Growth in Pakistan. The Pakistan Development Review, 51(4), 79-96. http://www.pide.org.pk/pdf/PDR/2012/Volume4/79-96.pdf
Avramovic, D., Husain, S. S., de Weille, J., Froland, J., Hayes, J. P., & Wyss, H. (1964). Economic growth and external debt, World Bank Group. United States of America. https://policycommons.net/artifacts-/1472364/economic-growth-and-external-debt/2126499/ . CID: 20.500.12592/drqv5d
Chaudhuri, P. (1989). Economic Theory of Growth. The Iowa State University Press, Ames, Iowa.
Cung, N. H., & Hua, L. (2013). Tax Burden and Foreign Direct Investment: Theory and Practice in Vietnam. Advances in Management and Applied Economics, 3(3), 1-6. http://www.scienpress.com-/Upload/AMAE%2fVol%203_3_6.pdf.
Ehigiamusoe, K. U., & Lean, H. H. (2019). Foreign capital inflows and economic growth in Nigeria: any nexus? Journal of African Business, 20(4), 455-471. https://doi.org/10.1080/15228916.2019.1581010
Engle, R. F., & Granger, C. W. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica, 55(2), 251–276. https://doi.org/10.2307/1913236.
Golder, U., Sheikh, M., & Sultana, F. (2021). The relationship between foreign aid and economic growth: Empirical evidence from Bangladesh. The Journal of Asian Finance, Economics and Business, 8(4), 625-633. https://ssrn.com/abstract=3826083
Hai, N. M., Hai, D. H., & Hung, N. M. (2018). Analysing the effects of the exporting on economic growth in Vietnam. Paper presented at the International Econometric Conference of Vietnam. https://doi.org/10.1007/978-3-319-73150-6_47
Jhingan, M. (2007). The Economics of Development and Planning, translated into Indonesian by D: Guritno. Jakarta: Rajawali Press.
Johansen, S. (1991). Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica: journal of the Econometric Society, 59(6), 1551-1580. https://doi.org/-10.2307/2938278
Kasidi, F., & Said, A. M. (2013). Impact of External Debt on Economic Growth: A Case Study of Tanzania. Advances in Management and Applied Economics, 3(4), 59-82. https://www.scienpress.com-/Upload/AMAE/Vol%203_4_6.pdf
Le, B., Ngo, T. T. T., Nguyen, N. T., & Nguyen, D. T. (2021). The relationship between foreign direct investment and local economic growth: A case study of Binh Dinh Province, Vietnam. The Journal of Asian Finance, Economics and Business, 8(4), 33-42. https://doi.org/10.13106/jafeb.2021.vol8.no4.0033
Liu, H., Nguyen, H. C., & Tran, T. H. (2012). Tax burden and economic growth: theory and practice in Vietnam. Paper presented at the 2nd International Conference on Business and Economics Research (ICBER).
Lloyd, T., Morrisey, O., & Osei, R. (2001). Aid, export and growth in ghana (No. 01/01). CREDIT Research Paper.
Asafo, S. S., & Matuka, A. (2019). External debt and economic growth in Ghana: a co-integration and vector error correction analysis. Theoretical and Practical Research in the Economic Fields, 10(1), 45-53. https://doi.org/10.14505/tpref.v10.1(19).05
Moh’d AL-Tamimi, K. A., & Mohammad, S. J. (2019). Impact of external debt on economic growth in Jordan for the period (2010–2017). International Journal of Economics and Finance, 11(4), 114-118. DOI:10.5539/ijef.v11n4p114
Nguyen, C. H. (2020). The impact of foreign direct investment, aid and exports on economic growth in Vietnam. The Journal of Asian Finance, Economics and Business, 7(10), 581-589. https://doi.org/10.13106/jafeb.2020.vol7.no10.581
Nguyen, C. H., Pham, T. T. Q., Tran, T. H., & Nguyen, T. H. (2021). The relationship between foreign capital inflows and economic growth: Empirical evidence from Vietnam. The Journal of Asian Finance, Economics and Business, 8(11), 325-332. https://doi.org/10.13106/jafeb.2021.vol8.no11.0325
Omodero, C. O., & Alpheaus, O. E. (2019). The effect of foreign debt on the economic growth of Nigeria. Management Dynamics in the Knowledge Economy, 7(3), 291-306. DOI 10.25019/MDKE/7.3.01.
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. doi: https://doi.org/10.1002/jae.616
Quoc, C. H., & Thi, C. D. (2018). Analysis of foreign direct investment and economic growth in Vietnam. International Journal of Business, Economics and Law, 15(5), 19-27. https://ijbel.com/wp-content/uploads/2018/04/IJBEL15_208.pdf
Rehman, S. U., & Ahmad, H. K. (2016). The impact of foreign capital inflows on economic growth: pooled mean group analysis for developing countries. Pakistan Economic and Social Review, 54(2), 191-203. https://www.econpu.edu.pk/wp-content/uploads/2017/04/2-v54_2_16.pdf
Samuelson, P. A., & Nordhaus, W. D. (2010). Economics (19. Aufl.). Boston: McGraw-Hill Irwin.
Saxena, S. P., & Shanker, I. (2018). External debt and economic growth in India. Social Science Asia, 4(1), 15-25. http://164.115.28.46/nrctejournal/file_upload/digital_file/161_f1503.pdf
Singh, G. (2015). Causality Between Export and Economic Growth: A Cause Study of India. Indian Journal of Accounting, 16(1), 109-120. https://ssrn.com/abstract=2714774
Sulaiman, L., & Azeez, B. (2012). Effect of external debt on economic growth of Nigeria. Journal of Economics and sustainable Development, 3(8), 71-79. https://core.ac.uk/download/pdf/234645667.pdf
Shin, Y., & Pesaran, M. H. (1999). An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis. In Econometrics and Economic Theory in the 20th century: The Ragnar Frish Centennial Symposium (pp. 371-413). Cambridge University Press.
Sijabat, R. (2022). The Association of Economic Growth, Foreign Aid, Foreign Direct Investment and Gross Capital Formation in Indonesia: Evidence from the Toda–Yamamoto Approach. Economies, 10(4), 93. https://doi.org/10.3390/economies10040093
Todaro, M., & Smith, S. (2006). Economic Development (nineth edition). England: Pearson Educational Limited.
World Bank (2022). World Development Indicators. http://databank.worldbank.org/ data/reports.aspx?source=World-Development-Indicators
Zouhaier, H., & Fatma, M. (2014). Debt and economic growth. International Journal of Economics and Financial Issues, 4(2), 440-448. https://dergipark.org.tr/en/pub/ijefi/issue/31962/352013
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